How long should I fix my mortgage for?

how long should I fix my mortgage for

How long should I fix my mortgage for?

When looking for a mortgage, you have the option of a variable rate mortgage (such as a tracker mortgage) or a fixed-rate mortgage.

There are advantages to taking out a fixed-rate mortgage. For one thing, you will be on a fixed interest rate, so you won’t have to worry about fluctuating rates over the duration of your mortgage. You will also know how much you have to pay each month. This is so you will be able to budget for your mortgage, without having to worry about sudden interest hikes over your mortgage term.

Learn more about the different mortgage types here.

These are just some of the reasons why many people prefer fixed-rate mortgages when looking to purchase a property. Chances are, they might be preferable to you too, especially if you want to benefit from the lower rates that lenders will incentivise you with when advertising their fixed rate offers.

If you decide to take out a loan of this type, you will have to determine how long you want your fixed rate for. In this guide, we will take a closer look at fixed-rate mortgages and the fixed term periods you might want to consider. For a more detailed discussion, get in touch with our team. We have access to the whole mortgage market and will discuss your options with you.

Fixed-rate mortgages explained

 

What is the average term people fix a mortgage for?

Most borrowers generally choose between a 2 or 5-year fixed term, as this gives them the option to take out new mortgage deals once their term has ended.

However, your lender might also offer you other fixed periods, such as a 3-year or 10-year fixed-rate deal. In some cases, you might be offered a mortgage for a 15-year fixed period, or perhaps something over a longer period

Generally speaking, the longer the fixed-rate period lasts, the more you will have to pay in the long term. However, you will benefit if there is an interest rate rise, as you won’t incur the price increases that will affect borrowers with tracker mortgages.

When deciding on your fixed term, there are a couple of questions to consider.

How long are you planning on living in the property?

If you are only planning on living in a property for a few years, it makes sense to consider a fixed-rate deal that matches your requirements. It may not be the best option to choose a 10-year deal, for example, if you were planning on living in the house for a shorter term. This is because early repayment charges may apply if you leave a deal early so it’s wise to consider your future plans before taking out a mortgage.

A shorter fixed period would give you more flexibility to move earlier. It would cover you if interest rates drop too. You could remortgage onto a better deal if rates fall, which would be a better option than sticking with the lender’s SVR (standard variable rate) after your fixed term ends.

Of course, if you are planning to move into a ‘forever home’, you might decide to opt for a fixed-term deal that covers a much longer period. You will pay more over time but you won’t have the hassle of remortgaging, which can be stressful for some people.

What are the current interest rates like?

When deciding how long to fix your mortgage for, you should take the current interest rates into account.

If they are ultra-low interest rates or in a rate rising environment, it might make sense to fix your mortgage for a longer period. You will then be locked into the lower rate for the duration of your mortgage.

However, if interest rates are high, and if you think they are likely to fall, you might want to decide on a shorter-term deal. This would give you the option to leave your mortgage at the end of the term and when early repayment charges apply no longer and sign up for one with hopefully lower rates of interest.

Speak to a mortgage broker

It’s always recommended to speak to a mortgage broker. They will consider your personal circumstances, discuss the mortgage market with you, and will help you get an affordable deal.

It’s at this point that we recommend our services to you as, unlike certain other mortgage brokers, we provide FEE-FREE advice and support for all of our customers. Many clients have benefited from the mortgages we have accessed for them, so talk to a member of our team at your earliest opportunity if you are considering a fixed-rate mortgage.

Keep reading below for advice on different fixed-rate periods.

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2 year fixed rate mortgage

If you’re planning to live in a property for the short term, then a 2-year fixed-rate term could be the best option for you. You can then sell your house and leave after 2 years, without having to pay an early repayment charge. Alternatively, you can remortgage to get another fixed deal, preferably one with lower interest to reduce your fixed monthly payment.

You should also consider a 2-year fixed-rate mortgage if you’re on a budget. This way, you can benefit from smaller mortgage repayments and have the peace of mind that there will be no sudden rise in interest.

5 year fixed rate mortgage

If you need more than a 2-year deal, this could be a good bet for you. You would have the opportunity to move or remortgage after the 5-year period ends, without the higher repayments you might incur if you take out a longer-term.

Mortgage rates on a 5-year deal typically aren’t a lot higher than those on a 2-year deal so you wouldn’t have to pay too much more if you decide on this option.

10 year fixed rate mortgage

If you don’t intend to move within 10 years, then this could be the best deal for you. You will have the peace of mind that your repayments won’t change and you won’t have to worry about remortgaging early.

However, you won’t benefit from lower interest rates if they eventually fall, so this is something to take into account. Despite the stress of remortgaging, it can be useful if interest rates drop and you want something more affordable than your current mortgage deal.

Mortgages at longer fixed-terms

While 10-year fixed-rate mortgage loans are common, many borrowers are now considering longer-term mortgages. These include any deals that span for 11 years or longer, including :

  • 20 year fixed rate mortgage deals
  • 30 year fixed rate mortgage deals
  • 40 year fixed term mortgage deals

The advantage of these deals is that mortgage borrowers don’t have to worry about fluctuating interest rates or remortgaging during the longer lifetime of their mortgages. As these deals are now becoming more commonplace, they may be of interest to you. Such deals include the new mortgage ‘full term’ products that we discuss below, which are becoming increasingly attractive to home buyers.

Fixing your mortgage rate for the full term

Several lenders including Kensington mortgages have launched mortgage products that allow borrowers to fix their mortgage rates ‘for life. ‘

These give borrowers the opportunity to take out a full-length contract, without the worry of remortgaging down the line. Some of these deals are also portable so homeowners can transfer their mortgage to a new property once they move.

Lending restrictions might apply when fixing a mortgage rate for the full term, depending on specific mortgage lenders. Options may be limited to those over 50, for example, as a 40-year mortgage is unlikely to be offered to them.

Most lenders take the applicants level of income and credit history into account too, alongside other factors. However, to those that do qualify, there are reasons why these longer mortgage deals are becoming increasingly attractive. We take a closer look below.

The benefits of a longer fixed-rate full mortgage term

One of the main benefits of a longer fixed-rate full mortgage term is peace of mind. Borrowers won’t need to worry about remortgaging or fluctuating interest rates ever again. If they do remain on these mortgages for the ‘full term’, they will know how much they need to set aside each month until the day the mortgage is paid off for good. Unlike tracker mortgages, which are a form of variable rate mortgage, there will be no need to worry about making adjustments to account for any repayment changes.

One lender, when discussing their particular mortgage product, has promised a boost in borrowing power for home buyers. They said that this is due to the way they use the fixed rate to calculate affordability rather than the impact of a future variable stressed rate. As such, borrowers may be able to afford more expensive properties.

So, is this type of mortgage right for you? Possibly, as while you can expect to pay more over a longer-term, you may be able to reduce your monthly repayments and you won’t have to incur early repayment fees if you decide to move into a new property.

Who will benefit from a long term fixed mortgage?

Many people can benefit from a long-term fixed mortgage. These include:

First-time buyers

Higher LTV’s, more borrowing power, and reduced monthly repayments can make it easier for first-time buyers to get on the property ladder.

Professionals

Professionals such as doctors that are moving up the career ladder can benefit from these mortgages as they won’t have to incur a repayment charge when they also move up the property ladder. Learn more about mortgages for professionals here.

Family’s moving home

Having to pay to leave a mortgage rate early can hurt the bank balance of cash-strapped families but they won’t be stung by these if they are able to port their mortgage.

The Self Employed

With a fluctuating income, the self-employed have less to worry about when their monthly mortgage repayments stay the same for the long term.

Full-term rate mortgage product: acceptable credit criteria

Credit criteria are the factors lenders will use when determining whether or not to offer a full-term rate mortgage product to those interested in homeownership. Such factors will typically include:

  • Age: Lenders may prefer the borrower to be under the age of 55, especially when taking out a 40-year loan product
  • Bank statements: Lenders need to see evidence of affordability and the ability to pay the deposit
  • Employment: Lenders may reject an application if the applicant doesn’t have a consistent employment history

Other factors can include:

  • Arrears
  • CCJs
  • Credit history
  • Debt management plans
  • Property type

And more.

Contact us for more detailed information on the credit criteria many lenders use for full-term mortgage products.

A real-life example of a full-term mortgage rate product

Below is a summary of what you can expect from Kensington Mortgages Flexi Fixed For Term mortgage product.

Kensignton is not a mortgage broker, so you can’t get a mortgage directly through them. You can however use a fee-free mortgage broker like ourselves. We work with Kensington to provide you with a highly rated fee-free mortgage service, that literally does it all for you without any fees, ever. Our expert mortgage advisors are ready via phone, email, or WhatsApp today.

Mortgage term Minimum loan amount Maximum loan amount LTV Interest rates
11-15 years £75,000 £2,000,000 60% 2.83%
11-15 years £75,000 £500,000 95% 3.82%
16-20 years £75,000 £2,000,000 60% 2.84%
16-20 years £75,000 £500,000 95% 3.88%
21-25 years £75,000 £2,000,000 60% 2.85%
21-25 years £75,000 £500,000 95% 3.88%
26-30 years £75,000 £2,000,000 60% 2.90%
26-30 years £75,000 £500,00 95% 3.92%
31-35 years £75,000 £2,000,000 60% 3.16%
31-35 years £75,000 £500,000 95% 4.15%
36-40 years £75,000 £2,000,000 60% 3.34%
36-40 years £75,000 £500,000 95% 4.30%

* figures above are sourced from here and are true rates as of January 2022

Learn about loan to value (LTV) here.

Frequently Asked Questions

Full-term mortgages are ‘for life,’ meaning you don’t have to change mortgages, even if you decide to move house. Therefore, you won’t have to incur an early repayment charge when you port your full-term mortgage.

The Flexi interest rate is being offered by a mortgage lender called Kensington. The product released offers fixed-rate full-term mortgages for their customers. The Flexi fixed lets borrowers fix the rate on their mortgage, from anywhere between 11 and 40 years (the full term of the mortgage). The Flexi fixed is designed to give customers greater choice and flexibility, as well as peace of mind that there will be no fluctuating interest rates.

With a rate that is mixed on your mortgage, your monthly mortgage payments will remain fixed for the length of the mortgage deal. This means you will know how much your mortgage will cost at the outset, which can offer you long-term security if you need to know how much to budget for.

There are disadvantages. If interest rates drop, you won’t benefit from lower payments, unless you decide to remortgage. If you do decide to leave your mortgage early, you will usually incur early repayment charges.

With variable-rate mortgages, interest rate hikes can happen at any time. This can make it difficult to budget, as you won’t have the advantage of a fixed monthly payment. So, while you can benefit from lower repayments if interest rates drop, you may see an increase in your repayments if interest rates eventually rise.

Rates that are fixed on mortgages are generally preferable, but contact the team at YesCanDo Money for more details. We will discuss your options with you, and will give you advice on both short and long-term products.

 

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Steve Roberts
Steve Roberts

Stephen Roberts MAQ is the founder of YesCanDo Money, Hampshire's largest no-fee mortgage brokers. With over 30 years of mortgage experience, he has advised and helped thousands of First-time buyers buy their first home and home movers buy their dream home. Speak to a mortgage expert today by completing our contact form:

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